Smoot-Hawley Tariff of 1930

Definition

The Smoot-Hawley Tariff of 1930 was a significant piece of legislation that raised U.S. tariffs on over 20,000 imported goods, with the intention of protecting American industries during the Great Depression. This tariff is closely associated with trade policies that aimed to support domestic businesses but ultimately resulted in widespread retaliation from other countries, exacerbating the economic downturn and leading to a decrease in international trade.

5 Must Know Facts For Your Next Test

1. The Smoot-Hawley Tariff was initially designed to protect U.S. farmers from agricultural imports, but it ended up affecting a wide range of industries.
2. Many countries responded to the Smoot-Hawley Tariff by imposing their own tariffs on American goods, leading to a significant decline in international trade.
3. The passage of the tariff is often cited as one of the contributing factors to the deepening of the Great Depression, as it stifled economic recovery efforts.
4. Despite its intention to protect jobs in the U.S., the tariff ended up causing job losses due to reduced export markets for American businesses.
5. The Smoot-Hawley Tariff exemplified the dangers of protectionist policies during economic crises, influencing trade policy debates for decades afterward.

Review Questions

• How did the Smoot-Hawley Tariff impact international trade relations in the years following its enactment?
  • The Smoot-Hawley Tariff led to a significant deterioration in international trade relations as countries retaliated against U.S. tariffs by implementing their own higher tariffs on American goods. This resulted in a chain reaction that diminished global trade volumes and created economic tensions between nations. The isolationist stance taken by the U.S. through this tariff not only hurt foreign economies but also had dire consequences for American exporters who lost important markets.
• Discuss the intended versus actual outcomes of the Smoot-Hawley Tariff and how this reflects on economic policy during crises.
  • The intended outcome of the Smoot-Hawley Tariff was to protect American industries, particularly agriculture, from foreign competition amid the Great Depression. However, the actual outcome was counterproductive; instead of safeguarding jobs and boosting the economy, it led to retaliatory tariffs from other nations and a further decline in international trade. This stark contrast highlights how protectionist policies can backfire during economic crises, illustrating the complexities and risks associated with such measures.
• Evaluate the long-term implications of the Smoot-Hawley Tariff on U.S. trade policy and global economic relations.
  • The long-term implications of the Smoot-Hawley Tariff are profound, as it fundamentally shifted U.S. trade policy towards a more cautious approach regarding tariffs and protectionism. The negative consequences experienced during and after its implementation led policymakers to reconsider aggressive trade barriers in favor of promoting free trade agreements. The tariff's legacy continues to be felt today, influencing modern discussions about globalization, trade relationships, and economic strategy in times of crisis.

Related terms

Tariff: A tax imposed by a government on goods and services imported from other countries.

Protectionism: An economic policy that restricts imports to protect domestic industries from foreign competition.

Great Depression: A severe worldwide economic downturn that lasted from 1929 to the late 1930s, characterized by high unemployment, reduced consumer spending, and widespread bank failures.